Revolve Group Inc., a preferred vogue hub amongst younger influencer-obsessed buyers in the course of the pandemic, is seeing its shares tumble as gross sales dry up. So, in an try to juice the model, the corporate is making an attempt one thing it’s by no means completed earlier than — run an precise retailer.
The posh-adjacent retailer makes use of a advertising and marketing technique that’s largely about latching onto social media influencers with substantial followings and throwing glitzy events that they’ll attend to create an aura of movie star aspiration amongst clients. The entire course of takes place on-line, one thing that had labored superbly for Revolve, which carries greater than 120 manufacturers which can be widespread with Millennials and Gen-Z, together with Golden Goose, Free Individuals and Steve Madden.
However retail developments are altering. Customers more and more need to bodily see and check out on garments, creating demand for quaint brick-and-mortar shops and forcing on-line manufacturers to evolve or stagnate.
In response, Revolve launched a limited-time pop-up retailer in ritzy Aspen, Colorado, in December. In June, the corporate opened its first everlasting bodily location at that precise spot. The query now’s: The place does it go from right here?
“[Revolve has been] reticent to acknowledge the necessity for shops as a result of they’re such a web based, tech-forward firm,” Dylan Carden, an analyst at William Blair, mentioned in an interview. “Now right here they’re saying they’ll do it. The danger is that they don’t do it wholeheartedly.”
The corporate’s points are mirrored in its market capitalisation. Revolve’s valuation peaked in late 2021 in the course of the Covid-19 pandemic, nevertheless it has misplaced roughly 80 % since then, plunging from $6.4 billion on Nov. 18, 2021, to $1.3 billion, because the shares tumbled from a excessive of $87.79 to round $19.
That mentioned, Revolve stays a financially engaging enterprise. It has masses of cash and its earnings projections are rising.
Pop-Up Success
What’s extra, the Aspen pop-up retailer experiment was a hit, chief monetary officer Jesse Timmerman mentioned in an interview. Revolve selected the placement as a result of it matches with the retailer’s aspirational branding focusing on 18- to 35-year-old ladies. The outcomes exceeded expectations, making a everlasting retailer logical, Timmerman mentioned.
Now the corporate is places in luxurious locations just like the Hamptons seashore cities exterior New York or Montecito close to Santa Barbara, California. The corporate additionally might shoot for a flagship location in a rich city space akin to Manhattan or Beverly Hills.
Nevertheless, buyers shouldn’t anticipate Revolve to observe Aritzia Inc., a preferred retail model that began as a brick-and-mortar chain however turned to e-commerce. Its inventory has held up higher than Revolve’s, dropping round 33 % from its January 2022 peak, and the corporate now has greater than 100 shops around the globe.
“That’s not our type,” Timmerman mentioned. “When alternatives come up, we’ll take benefit.”
Wall Avenue isn’t completely bought on Revolve’s plans. Of the 19 analysts masking the corporate, solely eight have purchase scores, whereas 9 have holds and two have sells. Aritzia has 9 analysts monitoring it, with eight purchase scores and one maintain.
Revolve’s challenge is income development, which began to indicate indicators of life initially of the second quarter, Barclays analyst Trevor Younger wrote in a July 18 observe. The corporate will report its second-quarter earnings on Aug. 6 after the market closes. Younger has an underweight suggestion on the inventory and a Avenue-low value goal of $14.
The corporate’s largest power is a stable money place that offers it the power to pivot. For the previous 20 years, retail has been about “bricks and clicks, and the combination of the bodily and digital,” mentioned TD Cowen analyst Oliver Chen, who has a purchase score on the inventory. He mentioned bodily shops are a “pure development” for the corporate.
One other constructive is Revolve’s “data-driven product curation, enlargement into males’s and wonder, together with an influencer-led and events-based social-media technique,” Bloomberg Intelligence analyst Poonam Goyal wrote in a Could 7 observe.
Certainly, Revolve’s largest power could also be influencer advertising and marketing. For instance, the corporate hosts its personal invite-only “Revolve Pageant” on the annual Coachella music competition and holds attention-grabbing events made for media publicity.
Social Media Experts
The corporate has a knack for constructing consciousness by way of social media, mentioned Vanessa Flaherty, president of Digital Model Architects. She mentioned Revolve’s relationship with influencers is symbiotic: Revolve advantages from the influencers’ attain after they promote their garments, and influencers acquire entry to the corporate’s six million Instagram followers and unique occasions.
For instance, Revolve co-hosted a celebration on the 2022 Tremendous Bowl in Los Angeles with Justin Bieber and Drake performing. It additionally holds iconic model journeys, the place the corporate sends influencers to luxurious places for promotions and visibility.
“We went to Turks and Caicos, which for me was essentially the most thrilling factor I’ve in all probability ever completed in my profession,” Ella Rose, digital creator and founding father of Pores and skin by Ella, mentioned in an interview. A 27-year-old New Yorker who has over 230,000 followers on Instagram, Rose mentioned Revolve was “the best model I might consider to work with” when she was first beginning out.
Rose described her job as “virtually like a web based buddy that you’ve got a connection to.” Her followers usually ship direct messages asking for recommendation like, “I’m going out on a date this Friday, do you assume I ought to put on this?” she mentioned.
All of which factors to the retailer’s development potential and has buyers questioning if Revolve’s inventory value has fallen to a “actually engaging level,” mentioned Jordan McNamee, founding father of Optimist Fund, which owns Revolve shares.
In gentle of the corporate’s long-term upside, McNamee doesn’t imagine Revolve essentially wants bodily shops to continue to grow. Nevertheless, he thinks they’ll be key to the corporate’s future.
“Revolve shall be an enormous brick-and-mortar retailer over the subsequent 10 to twenty years,” McNamee mentioned. “That’s one thing I’m completely sure of simply due to the ambition of the 2 founders working the corporate.”
By Emily Forgash
